Why Virtual Property Rights Matter To You

The virtual property an avatar acquires in a virtual world can have meaning and significance in the real world. After my last post, I wondered if people were thinking: “Who cares?” To answer this question, my goal is to show how virtual world activity can touch everyones’ lives, even if you do not have an avatar.

Back in the 1990s, the Internet started out as a one-dimensional interface where people would look up information. This version was analogous to a massive encyclopedia. Web 2.0 came along and brought us Facebook, LinkedIn, online chatting, etc. Web 2.0 allows us to interact with one another, instead of the unilateral search-and-find of the old days. This back story is important because it is likely to become extinct in the future. The Internet’s next gen interface will be 3-D. The future of the Internet will be structured so that we will move around the Internet much like we do our real-lives, instead of jumping from website to website like we do now. In the near future, it is likely that if you wanted to look up information about the Battle of Gettysburg online, your avatar would go to the virtual library and poke around in the virtual books, or you could visit Gettysburg, Pennsylvania, instead of googling Gettysburg and looking at pictures.

The future of the Internet is this 3-D model, so how does this affect you (and the company you work for)? First, it’s likely that the company you work for, the university you attended, or your next vacation spot, already exists in the virtual world. It is more likely than not that something linked to you exists in the virtual world. Second, whether it happens now or later, at some point, you’ll be connected to the virtual world directly, either by creating an avatar or knowing someone who has. Whether you or your employer are involved with virtual worlds now or later, here are some real world legal implications.

• Intellectual Property

You may decide to expand your small business to the virtual world to increase your visibility, and you may post your registered trademarks. Or, the company you work for may have trademarked goods or services that exist in the virtual world. Unfortunately, trademark infringement is rampant in the virtual world, largely because trademark owners are not aware of this activity. For instance, most virtual watches purchased in Second Life are Rolex, but none are trademarked. Counterfeit goods and services in the virtual world may lead to brand tarnishment. In addition, the longer the trademark infringement goes on, the more support builds for trademark abandonment which leaves the trademark owner with no recourse whatsoever.

• Taxes

Virtual property transactions that result in tangible income accumulation raise tax questions. Broadly speaking, virtual world transactions are only taxable when they are converted into “real” money. Yet this assertion grows far more complicated when we consider the magnitude of virtual world economies. The IRS has said that as early as 2001, the GNP within virtual worlds was equivalent to about $135M. That GNP per user was roughly equal to the per capita GNP of Russia. Some economists estimate that this translates to avatars earning roughly $3.42 an hour, which is more than some earn in many developing countries. You, your employer, or your company could be taxed based on your virtual earnings.

• Employment Law Considerations

Whether you or your employer hires an avatar in the virtual world, or whether your employer sets guidelines for what its employees can do in the virtual world, there may be employment law considerations. When hiring an avatar in the virtual world, you really can’t ascertain who you’re hiring. Employers need to be thinking about whether they are complying with child labor laws, and the reporting of income guidelines. In the future, the issue may become whether minimum wage regulations apply.  To the extent that employers regulate what employees’ avatars may do in the virtual world,  employers should specify business appropriate avatar behavior and appearance.

• Privacy Considerations

Just like your workplace emails are not private, your business meetings/conversations/transactions on Second life aren’t private. This is important because say your employer sets up a virtual world business meeting about existing products, the information being discussed is being stored. The question your employer needs to determine is who has access to that stored information? An employer’s trade secrets could potentially be divulged. Equally as damning, an avatar’s personal information including items purchased, social interactions, and the net worth of the avatar, could be divulged. In the aggregate, statistics on avatar behavior could be as valuable as our searching behavior on Google is to Google’s advertisers.

The take-away is this: virtual worlds are expanding and eventually will impact all of us, either directly or indirectly. Whether you, your employer, or your company are engaged in the virtual world, it is important to understand how avatars operate within the interface, and the consequences from doing so.